Energy Bill

Lord Dixon-Smith Excerpts

Wednesday 11th December 2013 Lords Chamber

[Lord Teverson]

My Lords, I will comment on the amendment of the noble Lord, Lord Oxburgh. I agree and sympathise with my noble friend Lord Jenkin’s point that the Bill needs to proceed and that we must get it on to the statute book. The only reason I have pursued this is that, as the noble Lord, Lord Turner, suggested, the issue of the continued generation of electricity by coal is fundamental to the policies of both this and the previous Government, and therefore needs to be clarified. These two amendments are attempts to increase as far as possible certainty for investors and clarify the way forward. As the noble Lord, Lord Forsyth, said, that is not completely possible, but at least we can start to close down the risks and probabilities, which is one of the main purposes of the Bill. That is why the amendment has been pursued. I have been happy—although reluctant—not to pursue my own amendment but to try to reach a compromise.

Pricing is not a problem here. Would coal being removed from electricity generation lead to the threat of price increases? In the past few years, when coal has come on, we have not seen prices fall; in fact, the more coal has come on the system, the more they have gone up. That is the correlation; I would not say it is directly causal, but that is the history of how this has worked.

On security of supply, the vast majority of that coal comes from Russia and Colombia, with a little bit from the United States as well. The security of supply arguments do not, therefore, all run in one direction. On the question of how the coal generating industry is treated under any of these amendments, it will be free to operate at peak times for a long time. That, along with contributing into the capacity market, will be greatly to the financial benefit of the power station operators.

That is why these amendments are important. I know that this is not important to everybody, but it is estimated that our carbon emissions went up by 4.5% last year, at a time when we were hoping to bring them down. That was because of the increase in coal generation of electricity, according to the Department of Energy and Climate Change.

This is a good Bill. I congratulate my noble friend the Minister on all that she has succeeded in doing during the passage of the Bill. This is the only contentious Lords amendment, and I seriously regret that the Government have not been able to find a compromise or to help us through this important, core issue.

[Lord Dixon-Smith (Con)]

My Lords, I had not expected to intervene in this debate, but the previous two speeches have forced me to my feet. I remind the House that these amendments, and this part of the Bill, are talking about 2025. There is only one significant carbon target which must be met, which applies in 2050. The rest of it is interim planning. If we are being silly here, of which I am quite capable, and sticking to an interim target, we are taking a very short-term view.

[Lord Turner of Ecchinswell (CB)]

My Lords, I simply point out that the interim targets in the form of the actual budgets are legally binding commitments of the Government under the Climate Change Act. Once the budgets are set—three budgets in advance—they are not merely planning guidelines but are part of the Government’s legally binding commitments.

[Lord Dixon-Smith]

I am used to the Chancellor of the Exchequer making annual Budgets and I have been involved in politics indirectly and directly for a very long time. If the Chancellor of the Exchequer is forced to, shall we say, amend interim budgets, it seems to me that sticking our feet in the ground over an energy budget is not exactly wise.

[Baroness Verma]

My Lords, I am grateful to all noble Lords for their contribution to the debate. I hope that in my opening remarks I made it clear that the Government recognise the intention behind this amendment. Of course we share that intention, but I believe that the differences between us are very narrow, even though they are very important.

It boils down to an assessment of risk. All sides in this debate can agree that we neither expect nor desire large amounts of unabated coal to be operating in the 2020s, but, as my noble friends Lord Forsyth and Lord Jenkin of Roding have rightly pointed out, we cannot be sure today exactly what will be required in those years. The Government’s position is that we should take a precautionary approach, given the serious potential for security of supply implications and the impact on consumer bills if we get it wrong. We should send a clear signal that unabated coal has only a limited future in helping us to transition to a lower carbon economy by creating an EPS that applies to any new coal plant. I appreciate the attempt of the noble Lord, Lord Oxburgh, to find an alternative, but no responsible Government could or should take risks that potentially put energy security in danger.

The noble Baroness, Lady Worthington, raised a point on the capacity market; our view is that capacity payments are likely to have only a marginal impact on the overall economics of coal plant and more important drivers on occasions where upgrading will relate to the overall state of an operator’s plant, an operator’s view of the market and the value that they place on retaining coal as a hedge. Even were they able to do so, this could mean that coal plants stay open longer, but they would operate at low-load factors and hence have low carbon emissions, given the evolution of the energy market with more low-carbon generation and carbon pricing. The noble Baroness could not give complete assurance that energy security would not be at risk. She could not say that prices would stay the same—her own party’s policy does not say that.

It is time that we looked at the elephant in the Chamber—the investors. After months of uncertainty, investors are looking at us in dismay. The most important thing we need to do is to provide certainty for investors by securing Royal Assent. The Confederation of British Industry has said that the Energy Bill has undergone significant scrutiny within Parliament as well as by industry and other stakeholders and it has the broad support of industry and investors in its current shape. It is important to the success of EMR that the Energy Bill receives Royal Assent in 2013, allowing investors to make those well needed decisions about investment.